Insurers navigate choppy waters 

Insurers navigate choppy waters 

Source: Insurers navigate choppy waters | The Financial Gazette November 2, 2017

Edward Gomba

Edward Gomba

THE insurance sector is once again under spotlight as investments suffer erosion due to increased money supply growth and supplementary inflation. So far, insurance sector players have reported coming under pressure from an increasing lack of confidence from a population that lost insurance investments under the hyperinflationary era which ended in 2009. TheFinancial Gazette’s Online Editor, Paul Nyakazeya (PN), spoke to the Insurance Institute of Zimbabwe president, Edward Gomba (EG), on the issues.

PN: What is the role of the Insurance Institute of Zimbabwe (IIZ)?
EG: The role of Insurance Institute of Zimbabwe is to provide professional training to the insurance and pensions personnel in Zimbabwe and the insurance industry at large. In other words, it is a professional training arm of the Insurance Industry in Zimbabwe.

PN: As the IIZ’s current president, what is your vision for the country’s insurance sector?

EG: My vision is to see to it that the insurance industry grows beyond its current status. For this to happen effectively and efficiently, training must be at the core in the industry in order for the market to get well thought out products and even top notch customer service. IIZ then plays a critical role.

PN: The average life assurance and pension fund investor felt robbed of their savings before dollarisation in 2009 due to high inflation. There is a lot of talk that we are slowly heading towards that direction as far as investments are concerned. What role has your sector played to preserve value of investments?

EG: With most of the insurance players, the conversion of pension savings from Zimbabwe dollar to US dollar was done using the Old Mutual implied rate to cover the policy holders against erosion of their pension values. In addition, the government has come in to complement these efforts by setting up the Commission of Inquiry whose mandate was to look at the conversion so that no policy holders were short changed.

PN: Against all these developments, what has been the trust level among clients and how has the introduction of bond notes impacted on the insurance sector?

EG: There were mixed feelings when the bond notes started to lose value but now our clients have adjusted to the status quo. The first days (of bond notes introduction) to a certain extent provided liquidity in the market and enabled the cash clients to have at least some disposable income for premiums payments. As time went on, and bond notes were losing value and becoming unavailable in the market, there was some serious reduction in premiums collection and this has resulted in most of the cash policies lapsing and some not being taken up.

PN: Do you see the insurance industry growing?

EG: Definitely, the insurance industry will grow. What is only needed is to make sure that the economy runs well to bring much more confidence to our clients. The stability of the economy will allow our clients to have disposable incomes to pay their monthly premiums and also to have more policies which will in turn make the insurance industry support government through infrastructure development and investment to support agriculture.
PN: The perception out there is that insurers are quick to receive money from their clients but very slow to react when it comes to meeting their end of the bargain in times of need. The question then is: What is the incentive of insuring if one is not able to enjoy the benefits of the insurance?
EG: I think that perception is not always correct. If your policy is up to date without any challenges on premium payments, underwriters and insurance companies usually react swiftly to a claim without any challenges. It is only when the client has not been paying consistently when delays might happen and sometimes when polices would have lapsed and then no claim is fulfilled, then the notion arises that insurance companies are not owning up to their obligations.

PN: The insurance industry is a highly regulated industry with the sole objective of protecting policyholders and the public. Has fraud and corruption also affected the sector?
EG: Yes there has been some fraud in the insurance industry due to promises of high sums being assured by other players in the industry. However, the insurance sector has put some measures to try and manage these kinds of fraudulent activities in their companies.
PN: The Commissioner of Insurance, mandated by the government to regulate the insurance industry, sets minimum standards that every insurer should comply with. Are all players complying?

EG: Most of the companies are working towards compliance. It is the wish of all companies to comply faster but the economic challenges are affecting organisations. We hope our regulatory authority is going to consider accepting extensions of the deadlines due to the dynamics and challenges in our economy.

PN: Clients are now more critical when it comes to deciding who to deal with. Do underwriters have the capacity to pay at this moment? Furthermore, do they have good balance sheet sizes to support good reinsurance programmes?

EG: Yes they have the capacity to pay at this moment. Claims are being paid and attended to on a daily basis, so underwriters have the capacity to pay. Yes, they also have good balance sheets to support good reinsurance programmes.

PN: Insurance companies have tended to rely on investment income with very little being recorded from underwriting income. Is this likely to change this time around from what the industry has experienced since introduction of bond notes?

EG: This trend is going to continue as it is the sector practice the world over that policy holders’ savings are safeguarded through investments. The introduction of bond notes has in no way changed this as they are trading at par with the US dollar.

PN: The issue of minimum capital requirements for companies by IPEC, is it fair or you feel it should be revised downwards?

EG: Not necessarily to review downwards but I think it will be fair to do a risk-based approach whereby the regulator is to assess the risks per organisation then come up with their capital requirements based on the risk assessed for each company as opposed to coming up with a one jacket fits all kind of capital requirement. Minimum capital levels are however critical in as far as safeguarding policy holder savings is concerned.

PN: What have been the insurance sector’s major highlights since the beginning of the year?

EG: The major highlights have been the introduction of micro insurance in the insurance sector, the introduction of the training of pension fund trustees by IIZ and the introduction of funeral industry COP certificate by IIZ. Other highlights include the purchase of a property in Mount Pleasant to build a College or School of Insurance by the Insurance Institute of Zimbabwe, the coming in of our new regulator, Mr (Tendai) Karonga and the radio programmes being sponsored by IPEC for the whole industry as a consumer awareness programme, just to mention a few.